Continuity or discontinuity?

When you think about strategy, are you assuming a continuous or discontinuous environment?

In a fascinating book, Creative Destruction, Richard Foster and Sarah Kaplah note some remarkable trends.

Most intriguing is how the turnover of S&P 500 companies is accelerating as companies are born and die. (The flipside is that the average tenure is declining — from an expected 65 years in the 1920’s to under 25 years in the late 1990s. The study extrapolates to predict an average lifetime of ten years as we approach 2020.

So what does this mean for how we think about strategy …

The authors note (p.10), “Corporations are built on the assumption of continuity; their focus is on operations. Capital markets are built on the assumption of discontinuity; their focus is on creation and destruction.”

If you were building a company in the industrial era, you could assume a continuous environment. The preferred strategy was to build scale and control costs. As the environment has shifted, this approach doesn’t work.

So is there an approach for how to think about strategy in a discontinuous environment? Stay tuned.